In June 2020, the ATO released PCG 2020/5, which advised that the ATO would not be allocating compliance resources to determining whether the NALI provisions apply to non-arm’s length expenditure of a general nature for the 2019-20, 2020-21, and 2021-22 income years.
Speaking at a recent conference, ATO assistant commissioner, SMSF regulatory branch Justin Micale said that despite the government’s recent announcement that it intends to consult with industry stakeholders about the operation of the NALI provisions, the ATO “must administer the law as it currently stands”.
“This time around, we do not intend to extend the PCG in response to the announcement. We really need to administer the law as it currently stands, and the scope and the timing of any potential legislative change is really not clear,” Mr Micale told delegates at the Tax Institute’s Superannuation Intensive.
“It wouldn’t be appropriate for us to make an administrative decision in anticipation of the outcome of the announced consultation process.”
Mr Micale said it was important to recognise that the ATO’s compliance approach outlined in PCG 2020/5 and in the appendix LCR 2021/2 are simply administrative decisions regarding where the ATO allocates its compliance resources.
“It’s not about a different interpretation of the law. In this circumstance, these approaches only apply to non-arm’s length expenditure of a general nature and they don’t have wider application. Really in the meantime, we do expect trustees to continue to apply the law as per our current interpretation in the LCR,” he said.
